Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (12) TMI 470 - AT - Income TaxDeduction u/s 10A - whether expenses that were reduced from export turnover should also be reduced from the total turnover or not? - HELD THAT:- CIT(A) allowed the claim of the assessee by following the decision rendered in the case of CIT Vs. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] upheld by HCL TECHNOLOGIES LTD. [2018 (5) TMI 357 - SUPREME COURT] held when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to it, the said ordinary meaning is to be in conformity with the context in which it is used. Hence, what is excluded from ‘export turnover’ must also be excluded from total turnover’, since one of the components of ‘total'. Disallowance of provision towards software expenses - above said amount included provision for software expenses - whether the provision for software expenses is a contingent liability or not? - addition u/s 40(a)(i) of the Act for non-deduction of tax at source - HELD THAT:- There is no dispute with regard to the fact that the assessee is following mercantile system of accounting. The assessee being a company, it is required to follow accounting standards prescribed by ICAI and also by the Central Government under the Income Tax Act. As per accounting standard-1 prescribed by the Central Government, the assessee is required to make provision for all known liabilities and losses even though the amount cannot be determined with certainty. Assessee has explained the basis for creating the provision for expenses. The Ld. A.R. also submitted that the accounts of the assessee have been audited by the statutory auditors and they did not find any fault with the quantum of provision for software expenses created by the assessee. Hence it is not a case that there was no basis for creating the Provision for software purchases. Accordingly, we are of the view that the provision for software expenses created by the assessee cannot be considered as contingent liability. Disallowance u/s 40(a)(i) is liable to be deleted for the year under consideration. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance. Disallowance of Software expenses u/s 40(a)(i) - HELD THAT:- Since the year under consideration falls prior to the date of decision rendered by Hon’ble Karnataka High Court in the case of Samsung Electronics Ltd [2011 (10) TMI 195 - KARNATAKA HIGH COURT] following the decision rendered by the co-ordinate bench in the case of Infineon Technologies India Pvt. Ltd [2020 (8) TMI 808 - ITAT BANGALORE] we hold that no disallowance u/s 40(a)(i) is required to be made during the year under consideration. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance. Disallowance of software expenses treating the same as capital in nature - HELD THAT:- We notice that in the case of Toyota Kirloskar Motors (P) Ltd [2008 (9) TMI 254 - CESTAT BANGALORE] has held that, when the life of a computer or software is less than two years and the right to use it is for a limited period, the fee paid for acquisition of right is allowable as revenue expenditure and if the software is licensed for a particular period, fresh license fee is to be paid for utilizing it for subsequent years - Accordingly, we are of the view that the nature of software expenses, i.e., whether it is capital or revenue in nature, has to be determined by following the decision above - we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining it afresh.
|